Aluminium ingot inventory growth after CNY is generally controllable, with the price difference between Guangdong and Shanghai widening

On Feb 22, 2024, SMM data showed that the social inventory of aluminium ingots in China’s eight major markets was 706,000 mt, (the amount for sale stood at 580,000 mt), up 66,000 mt from Feb 18 and 215,000 mt from pre-CNY holiday level, exceeding expectations and remaining at the lowest compared to the same period of past seven years. In terms of weekly inventory changes after CNY in the past six years, inventory growth of 66,000 mt or 10.3% remained at a low level, indicating that the overall inventory growth is controllable. However, there was a backlog of about 20,000 mt of aluminium ingots at railway stations in Xinjiang. Shipments may be affected by bad weather and smelters still hold stocks, requiring close attention. The arrivals of goods in east and central China were affected by weather to varying degrees in the first week after CNY holiday, thus inventory build-up was mild. The inventory in the bonded area totalled 13,000 mt in the week, of which Shanghai bonded area reported at 9,200 mt, up 4,700 mt or more than 100% from pre-CNY holiday level. Although the import window remained closed after CNY holiday, possible inflows of bonded area inventory deserve attention. The inventory growth in south China has accelerated, but local ingots in transit is still normal, mainly cargo from the southwest. Due to the recent high cost of truck transportation, some of the cargoes originally slated for transportation by truck were shipped by railway, pushing up arrivals. As the current price difference between Guangdong and Shanghai has not widened enough, the inventory pressure in south China may ease slightly.